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Funding Social Security: The Transition in a Life-Cycle Growth Model

  • Kenneth A. Lewis


    (Department of Economics, University of Delaware)

  • Laurence S. Seidman

    (University of Delaware)

A life-cycle growth model is used to investigate the quantitative impact of gradually converting the financing of social security from pay-as-you-go (PAYGO) to full funding. The magnitudes of the losses and gains that particular age cohorts will experience under alternative speeds of conversion are estimated using empirically-reasonable parameter values based on the econometric literature. Transition path simulations of a gradual three-generation (90-year) conversion show small losses to current workers, but large gains to children and grandchildren of young workers, and even larger gains to future descendants.

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Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 28 (2002)
Issue (Month): 2 (Spring)
Pages: 159-180

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Handle: RePEc:eej:eeconj:v:28:y:2002:i:2:p:159-180
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